Note Secured with 401K Mutual Fund - Posted by Randy

Posted by Michael Morrongiello on June 08, 1999 at 23:46:46:

Creating a note and using retirement funds as collateral in an attempt to then selll or Offer that note to an investor so that one can raise cash is not a good idea.

Savvy investors know that a lien created using retirment funds or other retirement assests as the collateral are protected From creditors under Federal ERISA type protection laws.

It is doubtful an investor would purchase your note with these types of assets serving as the collateral.

Michael Morrongiello
American Note
Operations Manager
415-883-1284 Fax

Note Secured with 401K Mutual Fund - Posted by Randy

Posted by Randy on June 08, 1999 at 22:41:28:

I’m considering creating a note for $10,000 to raise cash. The best security I have for the note is my 401k mutual fund. I have taken a small loan, which still has a balance; hence I can’t take another loan until I pay off the existing loan. My question, is anyone aware of legal issues that would prevent me from utilizing the equity (currently $16k) for collateral for a new note from an outside source.

Assuming return was good and my credit was acceptable Is this a viable security for a note?

Re: Note Secured with 401K Mutual Fund - Posted by Hugh Bromma

Posted by Hugh Bromma on June 09, 1999 at 15:34:37:

Hi Randy:

The real reason that you don’t want to use your 401(k) as collateral is because it violates the anti assignment rule under section 401(a) of the IRS code. In other words, you can’t do it. As far as any concern about retirement plans being imune to judgments, that is a no longer true. Cases in the 5th and 2nd circuit courts have made almost all retirement plan assets, including qualified plan assets suitable for taking in judgments, unless certain very strict guidelines are followed. (Example of which is in our news and notewoerthy part of our web site: If you have any questions about this e-mail me.

Hugh Bromma
Entrust Administration, Inc.